The first two parts of this series have dealt with the types of position sensor technologies commonly utilized in industry today and have raised questions about the position sensor specifications that are most important to a particular application. The strengths and weaknesses as well as the relative unit cost of sensors have been examined. However, there is much more to the cost of ownership than the sensor’s price.
This final portion of the three-part series is devoted to understanding the true cost of ownership of the position sensor based on the cumulative effect of four distinct categories of costs:
- Initial costs: these include procurement costs like purchase price and shipping and landing costs; administrative and sourcing costs; paid warranty extensions; the cost of spares or back up equipment; cost of any ancillary gear like mounting hardware, electrical cables, external signal conditioners, DC power supplies, and uninterruptable AC power supplies (UPS); the cost of measurement standards or related equipment for calibration or periodic recalibration that would be purchased and stored on site; and application-specific software that is needed to make the sensor-based system useful to the user.
- Installation costs: these include costs of in-house personnel or outside contractors to mount and calibrate the hardware in situ; construction costs associated with the installation; the cost of calibration equipment rental, if any; the cost of third party QA certification if needed; the cost of operator training, whether on-site or at the sensor manufacturer, which then includes any travel expenses incurred; and the cost of documentation related to the installation, calibration procedures, and maintenance program.
- Maintenance costs: these costs include in-house personnel conducting preventative maintenance (PM) based on the sensor manufacturer’s recommendation; paid service contracts; and an in-house or third-party recalibration process, including a factory recalibration, based on an internal QA schedule for ISO 9001 or similar quality program compliance. Costs associated with sensor repair or replacement due to wearout or for an unanticipated failure are covered in the next category.
- Contingency costs: projected costs from sensor failure/wearout attributable to unscheduled down time and production interruption; if there is no spare sensor available, the lead time for a replacement, which contributes to the projected down time cost, as well as the procurement cost and the expedited shipping cost of the replacement sensor; and the projected costs to uninstall the failed sensor and to install and calibrate the replacement sensor in situ by in-house personnel or a contractor.
Sensing System Decisions Based on the Four Cost Categories
When and how some of the contingency costs come into play is partially determined by certain actions reflected in the initial cost section, like buying an extended warranty and/or purchasing a spare sensor. The fact that these contingency costs are only projected potential future costs is no reason to downplay or ignore them, because they play an important role in the risk assessment involved with the decision concerning which position sensor technology to choose for your system application.
For example, using contactless sensors with a good reliability history might make keeping a spare on hand an unnecessary expense, whereas purchasing an extended warranty and/or a spare is probably a good idea for a position sensor with known wearout susceptibility like a potentiometer. In a similar way, choosing a sensor with good long-term calibration stability minimizes the need for periodic recalibration and can lengthen the interval before recalibration may be required.
Although a sensor manufacturer may provide manuals and documentation for their product, there is a cost of for documenting the installation itself, the calibration procedures, and the system’s PM program. This cost may easily be overlooked, but usually contributes significantly to the true cost of ownership.
One of the more difficult decisions in considering total cost is whether to use in-house personnel or an outside contractor to do the installation and calibration. The installation part of this question is relatively straightforward, but the calibration decision depends whether calibration equipment must be purchased, or could be rented as needed, or whether an outside calibration contractor could provide the necessary calibration standards and equipment, which would obviate the need to purchase or rent this equipment.
Another cost that often lacks visibility is the training of maintenance personnel. Typically, this is not a significant expense with simple measuring systems, but can be quite important in more complex factory automation applications for position sensing. Of particular interest is the training of personnel regarding a preventive maintenance (PM) program to keep the system operating without interruption from sensor related issues. In many cases, a PM program is included in third-party service contracts for a system.
A key facet of operator training concerns interaction with application-specific software tailored to the sensing system. Ideally this training should be done on site by the software vendor, but sometimes it must be done at their location. With custom software, training operator(s) on site is strongly preferred. Either way, this important training is a cost that must be considered in relation to the overall system.
Several of these cost factors are related to the measuring system in general terms, but the choice of position sensor technology typically can have a significant bearing on the actual cost of the system, so with a little study, the cost effects of one or another choice of a sensor can usually be quantified.
Quantifying True Cost of a Sensing System
For a simple position measuring system, the direct costs of the system are easily identified, but there will still be some latent expenses which fall into one of the four categories noted above and ought to be included in the project budget. Typically, the budgeting for a simple sensing system has been done on an ad hoc basis merely by adding a sensor’s purchase cost and any ancillary equipment costs, without considering the related costs.
Clearly this approach does not show the total costs of the sensing system installation. A better budgeting process would be to examine the various costs exposed in the four cost categories listed above and compile a list of identifiable costs and expenses to be totalized as true cost.
For a more complex system, a careful examination of the various costs, and a risk analysis pertaining to possible contingencies, can not only help in developing a more careful budgeting process, but also to head off problems resulting from unforeseen future expenses. As noted above, compiling a list of identifiable costs and expenses based on the four cost categories will aid in arriving at a true cost.
For each company or user putting a measuring system together, the true expenses or costs attributable to the various actions identified in the four cost categories above will normally vary based on local labor costs, logistics expenses, engineering rates, and management priorities, in addition to the direct costs. Thus, there is no universal chart or spreadsheet to use as a reference cost guide.
For engineers tasked with developing a budget for a sensor-based measuring system, helpful guidance regarding labor rates and other expenses may often be obtained from the company’s cost accounting personnel. And if only limited ability exists to judge how much effort is required for a sensor installation or calibration, it is reasonable to get an estimate or quotation from a third party with experience in performing such tasks.
Regardless of how the true cost of ownership (TCO) is obtained, that information is very important for making the selection of the appropriate position sensor technology to be used in the measuring system.
About the author
Harold Schaevitz, the third generation in the sensor industry, started his career in 1981 at Schaevitz Engineering as an eastern regional sales manager. He founded Schaevitz Intertech in 1990 for contract manufacturing. In 2006 he founded HGSI The Sensor Connection marketing and distributing EGT sensors and linear positions sensors. In 2009 he founded Sensing Solutions, specializing in marketing American-made linear position, rotary, and tilt sensing products to the Far East.